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Qualifying Free Zone Person in the UAE
Key Insights for Your Business
The introduction of the UAE’s Corporate Tax Law in June 2023 marked a new era for businesses across the Emirates. While the standard corporate tax rate is 0% on profits up to AED 375,000 and 9% on profits above that threshold, Free Zone companies can still benefit from a 0% tax rate—if they meet the criteria as a Qualifying Free Zone Person (QFZP)
What Is a Free Zone in the UAE?
A Free Zone is a designated area in the UAE offering favorable business conditions, such as simplified company setup, 100% foreign ownership, and historically, 0% corporate tax. Notable Free Zones include IFZA, Ajman Free Zone, RAKEZ, and DWTC. Under the new law, only companies classified as QFZPs can continue to enjoy the 0% tax rate.
Who Is a Qualifying Free Zone Person (QFZP)?
A Qualifying Free Zone Person (QFZP) is a legal entity or branch registered in a UAE Free Zone that fulfills specific requirements under the Corporate Tax Law. Meeting these conditions allows the entity to benefit from a 0% corporate tax rate on qualifying income, while non-qualifying income is taxed at 9%.
Key requirements include:
Incorporation in a UAE Free Zone: The business must be legally established in a designated Free Zone.
Adequate Economic Substance: Core income-generating activities must occur within the Free Zone, with sufficient assets, employees, and expenditure present.
Qualifying Income: The company must earn income from approved activities, such as transactions with other Free Zone Persons or specific activities with non-Free Zone entities, and keep non-qualifying income below the de-minimis threshold (≤ AED 5 million or ≤ 5% of total revenue).
No Election to Standard Tax Regime: The company must not opt into the standard 9% regime.
Transfer Pricing Compliance: All related-party transactions must meet arm’s length standards, with proper documentation.
Audited Financial Statements: Annual financials must be audited and compliant with IFRS.
De-minimis Threshold: Non-qualifying income must not exceed the lower of AED 5 million or 5% of total income.
What Happens If You Don’t Qualify?
Failure to meet any QFZP conditions results in the loss of 0% tax benefits. The company will be taxed at 9% on all income above AED 375,000 for the current year and the next four years.
What Income Qualifies?
Qualifying income includes:
Transactions with other Free Zone Persons (excluding certain activities)
Approved activities with mainland UAE or overseas clients
Passive/incidental income, provided non-qualifying income remains below the de-minimis threshold
Qualifying activities may include:
Manufacturing, processing, or logistics
Holding shares or securities
Fund and investment management
Headquarter and treasury services
Aircraft leasing and reinsurance (regulated)
Non-qualifying (excluded) activities include:
Most transactions with individuals
Banking and insurance (except specific cases)
Real estate (other than commercial property leased/sold to Free Zone Persons)
Intellectual property income (unless specifically qualifying
How HAS Global Tax Consultants Can Help
Navigating the QFZP regime is complex and requires strict adherence to regulatory requirements. At HAS Global Tax Consultants, we support Free Zone businesses with:
Assessing QFZP eligibility
Corporate tax registration and filing
Transfer pricing compliance
Ongoing compliance support to safeguard your 0% tax status
Contact our experts to ensure your Free Zone company remains compliant and tax-efficient under the UAE’s evolving corporate tax landscape.
For tailored advice and support, reach out to HAS Global Tax Consultants—your trusted partner in UAE tax compliance and business growth.